Once an asset is stabilized, a good rule of thumb is to assume that rent will increase by 3% as well as the expenses. The Syndicated Deal Analyzer uses this as its default in the 10 year profit and loss (P&L) projection.
Sometimes, however, you will want to fine-tune the P&L. For example, let’s assume you buy a building that has below-market rents. Once you and your property manager take over, you will probably start raising the rents aggressively. Even though this may take several years to achieve, the rents will increase by more than the default 3%.
Similarly, if the as-is expenses are 55% of income and your target is 45% within two years, then the expenses will actually *decrease*, not increase by the default 3%.
These are two examples where you might want to override the defaults in the Syndicated Deal Analyzer P&L.
Once you do that, the entire financial model, including the projected returns, are impacted.
In the next video (see below), I use the Syndicated Deal Analyzer to override the default P&L with a customized business plan, and we’ll review the impacts that has on our overall projections.
Watch Video and leave me your comments or questions below!